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Collusion enforcement with private information and private monitoring

Author

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  • Chan, Jimmy
  • Zhang, Wenzhang

Abstract

This paper shows that a cartel that observes neither costs, prices, nor sales may still enforce a collusive agreement by tying each firm's continuation profit to the truncated current profits of the other firms. The mechanism applies to both price and quantity competition, and the main features are broadly consistent with common cartel practice identified by Harrington and Skrzypacz [24].

Suggested Citation

  • Chan, Jimmy & Zhang, Wenzhang, 2015. "Collusion enforcement with private information and private monitoring," Journal of Economic Theory, Elsevier, vol. 157(C), pages 188-211.
    • Handle: RePEc:eee:jetheo:v:157:y:2015:i:c:p:188-211
    DOI: 10.1016/j.jet.2015.01.004
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," PSE-Ecole d'économie de Paris (Postprint) halshs-03760756, HAL.
    2. Harrington, Joseph E., 2017. "A theory of collusion with partial mutual understanding," Research in Economics, Elsevier, vol. 71(1), pages 140-158.
    3. David Spector, 2017. "Cheap talk, monitoring and collusion," Working Papers hal-01975642, HAL.
    4. Do, Jihwan, 2022. "Cheating and compensation in price-fixing cartels," Journal of Economic Theory, Elsevier, vol. 200(C).
    5. David K. Levine, 2021. "Fine cartels," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(2), pages 155-166, October.
    6. Sahuguet, Nicolas & Walckiers, Alexis, 2017. "A theory of hub-and-spoke collusion," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 353-370.
    7. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(2), pages 193-216, March.
    8. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Post-Print halshs-03760756, HAL.

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    More about this item

    Keywords

    Collusion; Oligopoly; Repeated game; Private information; Private monitoring;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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